Recordkeeping Requirements

SEC Rules 17a-3 and 17a-4 establish comprehensive recordkeeping requirements for broker-dealers. Understanding what records must be kept and for how long is essential for compliance.

Overview of Rules 17a-3 and 17a-4

RulePurpose
17a-3What records must be CREATED
17a-4How long records must be PRESERVED

These rules form the backbone of broker-dealer recordkeeping requirements.

Records That Must Be Created (17a-3)

Transaction Records

Record TypeDescription
BlottersDaily records of purchases, sales, receipts, deliveries
Trade ticketsOrder memoranda
ConfirmationsCopies of all customer confirmations
Account statementsCopies sent to customers

Customer Records

Record TypeDescription
Account recordsName, address, SSN, employment
Customer agreementsSigned agreements and authorizations
Suitability informationInvestment profile data
CorrespondenceCommunications with customers

Financial Records

Record TypeDescription
General ledgerAll assets, liabilities, income, expense
Stock recordPosition record for all securities
Trial balancesMonthly
Financial statementsQuarterly and annual

Compliance Records

Record TypeDescription
Supervisory recordsReviews and approvals
Exception reportsSurveillance reports
Customer complaintsWritten complaints and resolutions
CommunicationsEmails, texts, social media

Retention Periods (17a-4)

6-Year Retention

Record TypeRequirement
Trade blotters6 years (first 2 accessible)
General ledger6 years (first 2 accessible)
Stock record6 years (first 2 accessible)
Customer account records6 years after account closed
Trial balances6 years

3-Year Retention

Record TypeRequirement
Communications3 years (first 2 accessible)
Confirmations3 years
Canceled checks3 years
Bills and statements3 years
Compliance manuals3 years
Customer complaints3 years

Lifetime Retention

Record TypeRequirement
Articles of incorporationLife of firm
Partnership agreementsLife of firm
Minute booksLife of firm
Form BDLife of firm
Forms U4 and U53 years after termination

Accessibility Requirements

The "first 2 years accessible" requirement means:

  • Records must be readily accessible
  • Can be retrieved quickly for examination
  • Not archived in off-site storage

Electronic Recordkeeping

2022 Amendments (Effective 2023)

The SEC modernized electronic recordkeeping requirements:

OptionDescription
WORM StorageWrite Once, Read Many - traditional unalterable format
Audit Trail AlternativeSystem maintains complete audit trail for modifications

Requirements for Electronic Storage

  • Records must be immediately accessible
  • Must be able to produce legible copies
  • Must maintain backup records
  • Must allow for regulatory examination

Off-Channel Communications

2025 Enforcement Focus

FINRA and SEC have imposed over $2 billion in fines for recordkeeping failures related to off-channel communications:

ViolationIssue
Personal textsBusiness communications on personal devices
WhatsApp/SignalMessaging apps not captured by firm systems
Personal emailUsing non-firm email for business

Key Point: ALL business communications must be captured and retained, regardless of channel.

Third-Party Recordkeeping

Firms may use third-party services to maintain records if:

  • Firm retains direct and prompt access
  • Regulatory access is ensured
  • Records can be produced upon request
  • Firm remains responsible for compliance

Regulatory Examinations

What Regulators Review

AreaFocus
Books and recordsCompleteness and accuracy
Retention complianceProper retention periods
AccessibilityCan records be produced quickly
Electronic systemsProper storage and backup

2025 FINRA Focus

From FINRA's 2025 Regulatory Oversight Report:

  • Books and records remains top examination priority
  • ~40% of SEC broker-dealer cases involve recordkeeping
  • Off-channel communications continue to be focus area

Consequences of Non-Compliance

ConsequenceDescription
FinesCan be substantial (millions for large firms)
SuspensionBusiness operations may be limited
Enhanced supervisionAdditional oversight required
Reputational harmLoss of customer and regulator trust

Key Exam Points

  1. 17a-3 - What records to CREATE
  2. 17a-4 - How long to PRESERVE
  3. 6 years - Blotters, ledgers, customer accounts
  4. 3 years - Communications, confirmations, complaints
  5. First 2 accessible - Readily retrievable
  6. Lifetime - Corporate formation documents
  7. All communications - Must capture texts, emails, social media
  8. $2+ billion fines - Off-channel communication violations
Test Your Knowledge

Under SEC Rule 17a-4, how long must customer account records be retained?

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B
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D
Test Your Knowledge

What is the retention requirement for general correspondence with customers under SEC Rule 17a-4?

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B
C
D
Test Your Knowledge

A broker-dealer employee conducts business communications through personal text messages that are not captured by firm systems. What regulatory concern does this raise?

A
B
C
D